CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM The potential purchase price for a portion of former Aiea Sugar Mill land, which previously was razed, is capped at $9 million.

City looks to former
sugar mill site

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By Tim Ruel
truel@starbulletin.com

After years of touch-and-go and controversy, the city is moving forward with plans to purchase part of the property under the former Aiea Sugar Mill to build a $6 million community center, but the deal hinges on Bank of Hawaii cleaning up the land.

The city is negotiating to buy 6.88 acres of the 19-acre property from the bank, with a potential purchase price capped just under $9 million, money that was committed in the city budget shortly before the end of 2001. The final purchase price is likely to be much lower than that, depending on the negotiations, said Ben Lee, city managing director.

"I think we're very, very close to reaching an agreement," Lee said, noting that he hopes talks wrap up within two months. Bank of Hawaii wants to sell the property and began conferring with the city in May -- the same month the bank took over the sugar mill from former owner Crazy Shirts.

The Aiea/Pearl City vision team and the Aiea Community Association have been waiting for the land to serve as a home for the proposed Aiea Town Center, which has been in planning for the past five years, said Claire Tamamoto, who is a member of both organizations. Last year, the vision team and association approved a master plan to build a courtyard-style center that would contain several one-story L-shaped buildings, said Tamamoto.

Construction on the center would likely begin in 2003 or 2004, Lee said. In the meantime, the city has budgeted $290,000 to build a temporary park. The city is paying architecture firm Group 70 International Inc. $190,000 for the design of the park and the master plan, Lee said.

On Tuesday, a City Council committee took an official move in support of buying the property by approving a proposal to establish a government building map symbol for the site.

Bank of Hawaii recovered the 19-acre property from Crazy Shirts last year in lieu of foreclosing on a $38 million loan to the financially strapped retailer, records show. The city had previously negotiated with Crazy Shirts to buy part of the property, but Crazy Shirts complained when the city offered $8 million, far less than the $18 million the firm paid for the entire property in 1994.

Crazy Shirts has since filed for Chapter 11 reorganization bankruptcy, and the company was sold at an auction late last year to local retailer Waikiki Trader Corp. Bank of Hawaii was Crazy Shirt's largest creditor in the bankruptcy filing, owed $3.3 million for senior core debt and $12.9 million in secured and unsecured debt. It was not clear what payment the bank may receive from the sale of Crazy Shirts.

Former sugar mill The Aiea site has changed hands recently. Bank of Hawaii: Took over the property from owner Crazy Shirts in lieu of foreclosing on a $38 million loan. Crazy Shirts: Purchased the 19-acre property from A&B Properties for $19 million in 1994. The property was divided and put back on the market in 1996.

Rick Ralston, former owner of Crazy Shirts, originally bought the Aiea Sugar Mill with the vision of saving it from demolition and renovating it into a historic manufacturing hub. The philanthropist ditched the plan a couple years later, after learning it would cost millions of dollars to clean up the property from a century of housing a sugar mill and refinery. Ralston tore down the mill in 1998, much to the dismay of some members of the community, at a cost of $3 million.

The ground under the former mill is still laden with petroleum contaminants, and the city is insisting that the Bank of Hawaii come up with a firm plan to purify the property before a purchase takes place. The bank has volunteered to pay to clean up the land, and is working with the state Department of Health, but there's a dispute about the level of cleanup, Lee said. He declined to go into details.

There's a potential problem if the bank merely covers up contaminated soil as opposed to removing the soil entirely, said Tamamoto. Even if the center could be built by covering up the soil, the city could get stuck with a further cleanup if it wanted to build something different in the future.

"We certainly don't want to get stuck with any kind of future soil remediation," Lee said.

In 1999, the city sued Campbell Estate, Dole Food Co. and Oahu Sugar Co. to recoup costs of cleaning up chemical waste at Ewa Villages. The city had bought the 590-acre former mill site in February 1993, and later alleged that the defendants were negligent in releasing pollutants into the soil and water. The city won $1.3 million in a settlement in June 2001. Shortly after, however, the city said it would have to spend $2.1 million to remove lead contaminants from a Waipahu property it swapped to Castle & Cooke in 1999. Some council members complained about the oversight, and said the city should be more diligent in examining vacant land.

Stafford Kiguchi, spokesman for Bank of Hawaii, said in a written statement that the bank is seeking to accommodate the new Aiea Town Center without requiring further cleanup by the city. He noted that the bank has made a considerable effort to investigate the contamination of the site.

The master plan for the new Aiea community center includes guidelines for a new Aiea Public Library and senior housing facility. The site could also house a daycare center, art center, open market, volleyball court, picnic areas and other amenities. The concept is an atmosphere where local folks can hang out and "talk story," Tamamoto said. She's looking forward to the center, but she noted that it's not clear whether the state will pay for the new library. In 2000, Gov. Ben Cayetano vetoed $2.9 million to buy land next door for the library, saying that other projects were more important.

The sale of the sugar mill would mark the latest in a string of properties taken over and sold by the Bank of Hawaii.

The bank recently sold a three-story office building at 2153 N. King St., formerly called Pioneer Plaza Kalihi, for $4.2 million to Dreal Hawaii LLC, a unit of construction firm Belt Collins. Bankoh had taken over the property in March from the Marn family, which had paid $14.85 million in 1993, records show. Sofos Commercial Corp. brokered the deal.

Bank of Hawaii also recently sold 35 industrial acres at Campbell Industrial Park for $14.13 million to real estate investors Kurisu & Fergus.

The bank took over that acreage in May in lieu of foreclosing on former owner Mike Moon. The sale was brokered by Grubb & Ellis.